enterprise risk management (erm) minnesota department of transportation enterprise risk management...
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Enterprise Risk Management (ERM)
Minnesota Department of Transportation
TRB International Partnership DayTransportation: Putting Innovation and People to Work
January 26, 2012
DOT has formal, published risk management policies and procedures at the program or project level 35 of the 43 state DOTs (81 percent) 17 (39 percent ) have formalized ERM programs.
How confident are state DOTs at applying appropriate risk management strategies at the various levels of the enterprise: none felt that their agency was always successful, twenty-six respondents (62 percent) felt that they frequently apply the
appropriate strategies, nine (21 percent) felt that they seldom applied the appropriate strategy, and eight (19 percent) felt that they never apply the appropriate strategies.
State DOT State-Of-The-PracticeSource: NCHRP Report 20-24(74) Executive Strategies for Risk Management by State Departments of Transportation (2011)
Relationship of Risk Management to Transportation Business ObjectivesSource: NCHRP Report 20-24(74) Executive Strategies for Risk Management by State Departments of Transportation (2011)
MnDOT Strategic Vision
Global leader in transportation committed to upholding public needs and collaboration with internal and external
partners to create a safe, efficient and sustainable transportation system for the future.
MNDOT defines risk as the effects of uncertainty on objectives; or anything that could be an obstacle to achieving goals and objectives.
Enterprise Risk Management (ERM) is an analytic and management process that ensures a focus on identifying, assessing, and responding to the inherent uncertainties of managing an organization and its assets.
Enterprise Risk Management
Organizational Risk
Management
Programmatic Risk
Management
Project Risk Management
Operations Risk
Management
Workforce Products and Services
Quality of Life Indicators
Performance Measures
Market Research
–Risk Assessment–Market Research–Performance Management–Quality of Life
Enterprise Risk Management Results in Integrated:
• Each Organizational Unit’s Mission Manages Broader Risk(s) to MnDOT’s Strategic Vision
• Focus is on strategic objectives and corresponding areas of highest enterprise risk and benefit
• Assessing tasks, human resource levels, structure, or any risks to organizational unit performance objectives
Organizational Congruency Risk Management
• Balanced program risk assessment• Assessment of broad system and quality of life
risks • Linkage of risks to performance measures (risk
tolerance levels) at district and state levels• Program investment levels mitigate risks• Rate of recovery approach (e.g., Better Roads)• Assessment of State Transportation
Improvement Program and 10-year outlook
Performance-based Program RM
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Managing Pavements through Risk ManagementPe
rcen
t of M
iles
in P
oor C
ondi
tion
Current Investment Level
Risk Based Investment Level(Rate of Recovery Approach)
Flat Investment Level(Specific Performance Target)
• Identify and manage risk of each transportation project
• Respond to risk levels to develop each project – Business Case – Scope– Delivery Method
• Leads to oversight levels and management plans• Adjust design and performance• Adjust resources
Project Risk Management
• Assessing risks to current Operations budgets • Multiple levels and core services, such as snow and ice
control
• Highway Systems Operations Plan (HSOP)– Challenged proposed funding levels for needs– Resulted in $189 million in proposed cuts – Recommended acceptance of more risk– Prioritized budget risks and will help future evaluations for
budget cut and increase scenarios– The #1 investment priority need with current budget is to
increase funding level for road salt due to price increases
Operations Risk Management
• Establish Risk Management Working Group – “Leadership Development” candidates– Business Unit Management liaisons from each
Division– Internal and External Consultants (staff
augmentation and subject matter experts)
Project Next Steps
• Integrate ERM with:– Existing Risk Management Practices
• Organization, Program, Project and Operations– Market Research and Quality of Life Data– Performance Management– MnDOT’s system for setting annual goals with
employees (Performance Management & Appraisal)
Next Steps, continued
• Future Phases of Action Plans; Communications– Identify gaps and opportunities based on risk– Prioritize greatest risks to the strategic vision & communicate– Produce and implement action plans (e.g. business plans) to mitigate enterprise risk
and close gaps outside of accepted “risk appetite” with target time-frames– Assess adequacy and effectiveness of existing risk reporting– Develop process for periodic reporting of emerging risks– Assess progress and benefits of ERM initiative against objectives and communicate
to target audiences– Continue organization-wide communication process with links to performance
appraisal to build risk management culture– Assess on-going resource needs post project completion
Next Steps, continued
Discussion and Questions
Thank You!
Jean Wallace, Director, Policy Analysis Research & Innovation
Eric Davis, ERM Project Manager